Whilst many people who want to take out a personal loan still opt for the traditional routes such as High Street banks, another form of borrowing known as peer to peer lending has become increasingly popular over recent years, particularly given that it has become so much harder to get a personal loan through traditional means.
Online peer-to-peer lender Zopa launched in 2005 and in recent years has seen a sharp increase in the popularity of this type of borrowing. The company also said that one of the major benefits of peer to peer lending was the flexibility of the loans, with borrowers able to do things such as repay their loans early without any financial penalty, which is something that banks do not tend to allow.
Peer to peer lending also offers amongst the cheapest interest rates, as these are decided between the borrower and the lender, which again means increased flexibility. In the current climate many people who have had to borrow money for one reason or another are keen to repay it and unburden themselves of debt as soon as possible, and with the flexibility of peer to peer lending this is something that is possible with this type of loan compared to a personal loan through a High Street bank.
An official from Zopa said: “In almost all circumstances, it makes good financial sense to pay off your debts as quickly as you can, including any personal loans. But banks stand in the way of this by including early repayment penalties in their loans which put people off from doing the right thing. We think that is fundamentally wrong. Zopa loans have always allowed borrowers to pay more than their agreed repayments to clear the loan faster or indeed to repay the whole thing off early one go – all without penalty. This could be one of the key reasons we have been voted by the public as the most trusted personal loan provider for the last two years in a row.”